Commentary and analysis on markets, personal finance, and wealth building from a contrarian perspective. "I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting there and trying to dream it up all yourself. Nobody’s that smart."
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Thursday, December 22, 2016

Mongolia Bottoming?

The international financial community's confidence in the
Mongolian government's ability to deliver reforms and service its debt may be
improving after a long slump. That was the impression left by an investment
conference in Tokyo on Dec. 7, attended by foreign lenders and investors, and
officials from the country's central bank and legislature.

(snip)

In recent years, a sharp decline in resource prices led to a
drop in government revenues from the mining sector and to a deterioration in
the balance of payments. On June 29, the Democratic Party lost in a landslide
general election to the Mongolian People's Party, with former Finance Minister
Erdenebat Jargaltulga becoming prime minister.

The new government immediately started drafting policy
involving fiscal restructuring and structural reforms, and started talks with
the IMF. In late September, it officially requested a bailout.

Almost all the speakers pointed to a swift rebound in coal
and copper prices, both crucial exports. "The economic gods are starting
to smile for Mongolia," said veteran American investor Nicholas Edwards.
He pointed out that, thanks to the recent price increase, Mongolian coal mines
are starting to make money and that copper has been the best performing metal
for the past six weeks in international markets.

The commodity markets are cyclical. We are emerging from a five year bear market in commodities. I expect Mongolia will benefit from an improvement in commodity prices.